The new task of monitoring financial stability includes tracking the risks of financial instruments and learning where these risks are located within the financial marketplace. One way to do this is to track the quantities of financial instruments and which institutions hold them. In this article, Leonard Nakamura discusses some limitations of the current data and the current data framework and the extent to which we can use the Flow of Funds for understanding and monitoring the risk of the broad range of financial instruments, focusing on residential mortgages as an example.

This article appeared in the First Quarter 2013 edition of Business Review.

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